My plan is to buy the house subject to their existing mortgage, renovate the property, refinance it and pay off their remaining loan balance using the money from the cash out refinance.

Then you’re going to ask her to give you a 3 year 0% loan?

There are 3 ways this can happena) Salaries increase (unlikely)b) Interest rates drop (not very likely since we I believe we have $8T of debt to sell next year that is coming off books and China and Russia are not buying US dollar as muchc) Home prices drop2.

I'm not familiar with your market, but here are some thoughts:750 Sq ft is small for a 3/1.Interior looks like a flip but it seems like it has been owned by the sellers for a long time...so maybe not.They have been trying to sell this property for 6 months and have reduced price. 

Unlike a mortgage the interest on your loan will not be tax deductible.

It’s like you bought the properties with a 30 year loan and are putting the rest in to a savings account.

I have been trying to save up money but it is not near a down payment for a traditional loan.

They should able to answer how the proforma returns would impact a $50/100k investment in dollar amounts.

That all makes sense to me but it makes me wonder how can you be "financially free" or even just start building wealth if you are 100's of thousands of dollars in debt at all times.

We are closing on a 2/1 condo tomorrow with a small fenced backyard and a metal storage shed.